The Drivers and Measures of Success in High Performance
Organizations
Marc J. Epstein
Distinguished Research Professor of Management
Rice University
Abstract
Performance measurement and management control are critical components of improving
organizational performance. But, researchers have had little success in determining the specific actions
that lead to superior performance. Some researchers have proposed models and some companies and
consultants have implemented performance measurement systems and management control
mechanisms to improve performance. But, the results are unclear. Significant qualitative and
quantitative research is necessary to test the validity of the models being proposed and used. This
paper reports on a series of research studies that address these issues, provide some initial results, and
provide direction for much needed additional research.
At the core of the performance measurement and management control literature is a focus on better
understanding both the drivers and measures of organizational success. Both managers and researchers
attempt to identify the levers that can be used to improve organizational performance and how the
implementation of strategy can be more effective. The focus is on the characteristics of superior
organizational performance and the identifiable features of management control and performance
measurement systems that drive improved performance.
After several decades of research in this area, we have few clear conclusions. Empirically, we have
been able to say little about the specific actions that drive superior organizational performance. But,
recently researchers have provided some clarity. Managers and researchers have more carefully
collected and analyzed data to better understand the most effective management control and
performance measurement mechanisms to drive and measure organizational performance. But, far
more research is needed. Some of this research was reported in the prior volume from the first Nice
conference (Epstein and Manzoni 2002). Additional research is reported in this volume and provides
both results and guidance for future academic research and management practice.
There has been significant discussion in the last two years about corporate accountability (including
both corporate governance and transparency) and the imperative to improve organizational
performance. In Counting What Counts: Turning Corporate Accountability to Competitive Advantage,
Epstein and Birchard (1999) explored the elements of accountability and the role of both managers and
accountants in making significant improvements. At the core of the book, is the notion that
corporations are increasingly being evaluated more broadly and users of information recognize that
there is a broader set of elements of organizational performance that lead to long term success and a
broader set of measures of organizational success than has been previously used. What are those
specific elements and drivers that organizations have used and can use to drive long term success?
In Built to Last: Successful Habits of Visionary Companies, Jim Collins and Jerry Porras (1994)
reported on their research that addressed some of these questions and the distinguishing characteristics
of those companies that have been successful over a long time horizon. Jim Collins, in Good to Great:
Why Some Companies Make the Leap and Others Don’t (2001), continued this research and examined
the distinguishing characteristics of those successful companies that have transitioned from good
companies to those that have been truly outstanding over the long run.
In Counting What Counts, we also developed an approach to corporate performance that focuses on the
elements that drive success—focusing particularly on the management control and performance
measurement aspects. This includes the factors that distinguish a high performance organization from
those that are not high performance, the actions that companies can take to be more successful and
accountable, and the development of the appropriate leading and lagging indicators to measure
success. We also presented a corporate accountability cycle that includes four elements:
1) Governance—including leadership by senior managers and boards of directors
2) Measurement—including financial, operational, and social measures
3) Reporting---including both internal and external reporting for transparency
4) Management systems—including all management control systems for the implementation of
strategy
2
EXHIBIT 1 HERE
Epstein and Westbrook (2001) built on that work with the development of the Action Profit Linkage
Model that examines how to identify and measure the payoffs of various actions to drive success. (For
some examples, see Epstein 2002.) Recently, additional research has been completed that focuses on
identifying the management control actions related to superior organizational performance. What are
the specific actions that managers can take to drive really distinguishing, superior performance? The
work focuses on the link between actions and performance in five areas: governance, e-commerce,
innovation, mergers, and sustainability.
The objective is to better understand, drive, manage, and measure success both in overall corporate
governance and in various individual core functional activities. The models and applications are very
similar among all five. This review provides an opportunity to examine both the results of the research
and an identification of numerous remaining research questions in management control and
performance measurement in general and related specifically to drive superior organizational
performance.
1)
Governance—Building on the foundation of the accountability cycle in Counting What
Counts, Epstein and Roy (2002) developed a model for a clearer articulation of the drivers and
measures of performance of corporate boards of directors. Identifying the three strategic objectives for
boards of 1) strategic oversight, 2) accountability, and 3) monitoring and evaluating performance and
succession planning, Exhibit 2 describes the inputs, processes, outputs, and outcomes of board
activities with four key inputs and six key processes that lead to success in the three core objectives
and ultimate outcome of corporate profitability.
EXHIBIT 2 HERE
Although prior empirical research findings are not completely consistent regarding the impact of
corporate governance on corporate performance (Rhoades, Rechner et al 2000 and Korac-Kakabadse,
Kakabadse et al 2001), there is evidence that good corporate governance pays (Gompers, Ishii et al
2003, MacAvoy and Millstein 1999, McKinsey & Company 2002). It is imperative then that
researchers develop a clearer understanding of the specific managerial actions that can be taken to
drive superior performance and the appropriate performance measures to evaluate success. Then,
guidance can be provided to managers as to the specific management control mechanisms that can be
designed and implemented to improve performance. We need to apply the theories and empirical data
that have already been accumulated and develop additional research studies to provide this specific
guidance as to when some managerial control mechanisms work better than others, the payoffs of
management control actions, which actions drive higher levels of performance, and the appropriate
combination of multiple measures to identify and measure success. These would include both leading
and lagging indicators and evaluate inputs and processes along with outputs and outcomes.
Recently Enron has been in the news and was one of the major events that increased the focus on
corporate governance. Among the many concerns about management control at Enron was the
compensation and reward systems. Though there has been much in the academic literature that has
examined the benefits of tying rewards to performance, numerous companies lacked the controls to
balance the desired empowerment. For more on empowerment and control, see Simons (1995a, b).
3
A compensation system’s objective is to develop, motivate, monitor, evaluate, and reward senior
corporate executives. Traditionally this only required a cursory review of performance and relatively
standard pay increases. A decade ago, many suggested that to better align shareholders' and managers'
interests, companies should adopt pay plans that pay for performance and is linked to increases in
stock price (Hall and Lieberman 1998). However, because many of the measures of performance were
short term, executives received large bonuses as stock price went up but were not required to repay
them when stock prices ultimately fell. Further, since performance was often not benchmarked against
industry averages, a steadily rising stock market pushed many corporate share prices higher for
companies with only average performance (Murphy 2000). Thus, many CEOs with below industry
average performance received bonuses in the tens of millions of dollars.
Numerous other issues at Enron relate to the development of management control and performance
measurement systems to improve organizational performance. Enron demonstrates the importance of
both culture and trust in driving organizational performance (Currall and Epstein 2003). Monitoring
and managing the level of organizational trust, incentive pressure, and culture and how their fragility
can impact organizational success are critical responsibilities of senior managers and boards of
directors and are central to management control.
This corporate governance study also included the development of a balanced scorecard framework for
corporate governance and constructing three distinct balanced scorecards for evaluating board
performance, CEO performance, and to provide information for the board’s evaluation of corporate
performance (see Epstein and Roy 2002, 2003a). It also includes the objectives, the causal linkage
models, and a long list of metrics for each of the scorecards. The framework has been applied in some
companies. (For an example, see Kaplan and Nagel 2003.)
Unfortunately, presently there are few boards that systematically and comprehensively evaluate their
own performance or the performance of their board members. Recent regulatory changes also do not
solve the problem. They attempt to regulate the inputs but do very little to the processes. More
fundamental changes are necessary if performance is to be significantly improved and researchers need
to provide better guidance on the management control and performance measurement mechanisms--the systems, structures, culture, and people--- that can be used to drive superior performance.
2)
E-commerce---Though much has been written about internet strategy and internet marketing,
there is little about what managers can do to effectively implement an e-commerce strategy in large
organizations and drive superior performance. Effective management control systems and structures
and performance measurement systems are necessary to encourage desired cannibalization and other
changes within the organization and motivate the desired changes to improve performance.
EXHIBIT 3 HERE
Exhibit 3 is a model of the antecedents and consequences of e-commerce success. It describes the
actions that managers can take to improve the implementation of an e-commerce strategy including
both the inputs and processes and the outputs and outcomes of successful implementations. In a recent
research project, Epstein integrates the academic literature and twenty-five company case studies and
analysis to document the management control and performance evaluation approaches that lead to
4
success in the implementation of e-commerce. This includes an analysis of the successes and failures
in past implementations and provides guidance for managers and researchers as to the specific
management control and performance measurement actions that can be taken to lead to superior ecommerce performance and the metrics to more effectively evaluate success (Epstein 2004a). This
research study specifically includes the e-commerce strategies, structures, and systems including
performance evaluation, incentives, and rewards.
After the internet boom of the late 1990’s, there was a dramatic drop in both the value of internet
stocks and the perception of future internet development. The dot-com bust has led many companies to
reexamine their e-commerce strategy. It has also caused a careful evaluation of the specific actions that
will lead to increases in value creation and the payoffs of e-commerce implementation. Similar to the
deficiencies in the measurement of payoffs in other organizational functional units, the research
literature and management practice are substantially underdeveloped. There is little on how to measure
the performance of either the functional units or the managers or the evaluation of the payoffs of
investments in either information technology (IT) or e-commerce and little on what drives success.
We have learned that success in IT and the measures of the payoffs are clearly not website hits! It is
the actions that will drive ultimate profitability. A careful identification of the appropriate metrics to
evaluate success that includes inputs, process, and results measures that aligns with the exhibit above is
necessary (See Epstein 2004a and b).
Here again the objective is to document the specific actions that will lead to superior performance and
how companies might measure success and the payoffs of various managerial actions to improve
performance. Thus, we can see what specific inputs and processes are more likely to lead to success in
both e-commerce activities and overall corporate performance. This requires a clear understanding of
the objectives, drivers and metrics for each. Only then can researchers and managers determine what
resources should be expended and how these resources should be deployed to create value and improve
performance.
A recent article in Harvard Business Review was titled “Does IT Matter?” (Carr 2003) Though the title
was controversial, the content is not. The main message is that IT no longer creates a strong long term
competitive advantage for organizations. IT is necessary and critical but does not differentiate. So, an
e-commerce strategy is not the differentiator. The road to competitive advantage in IT and e-commerce
is through the execution—the implementation of strategy through various management control
mechanisms. Our research is attempting to determine and isolate the differences between superior
organizations and less superior ones related specifically to e-commerce performance and the factors
that lead to success.
3)
Innovation—Innovation is one of the most challenging areas for both corporate managers and
researchers. Managers report significant difficulty in achieving the desired amount of radical
innovation and developing an organization that is creative, innovative, and flexible while still
maintaining the level of desired control. Simons (1995a, b) has written extensively about the tensions
between empowerment and control yet managers still seem to find this balance difficult. Further, they
find that driving innovation in large bureaucratic organizations to be difficult and some have suggested
that to increase innovation in large organizations companies must make more effective use of
outsourcing. (See Quinn 2000, Chesbrough 2003) For researchers, innovation is challenging due to the
long time horizons, the high levels of uncertainty and risk, and the difficulty of measurement.
5
In a three year study on innovation, Davila, Epstein, and Shelton (2004) have examined the actions that
managers can take to improve performance in corporate innovation and how to measure success. This
study includes empirical data from two extensive surveys of corporate practices in 1997 and 2001 and
extensive field research and case studies. The leading global companies in innovation were studied to
determine the best practices for driving superior performance in innovation. Many of the companies
studied are those with annual spending on research and development of one to five billion dollars and
yet they report being generally dissatisfied with their performance in innovation complaining that they
cannot get the desired level of breakthroughs. The study concludes with an articulation of the
management control actions and performance measures that can be used to drive both breakthrough
and incremental innovation through the various phases of innovation including ideation (idea
development), selection, and execution for both technological and business model innovation.
Some results on the first survey have been reported in Davila, Epstein, and Matusik (2003). The results
of the project are dramatic. Both the specific management control actions and the performance
measures are critical in driving innovation success. Companies have found the development of
effective performance measures difficult as they have used typically unrelated measures such as
earnings as the basis for rewards. They are dissatisfied with the prospect of using results measures that
are too late and they have not developed process measures that link to performance.
As with the earlier studies reported here, the development of a clearer understanding of the causal
relationships is necessary to better understand the drivers of performance. Only then can effective
performance measures be developed that link actions to results. One manager reported the use of
number of projects launched as one of the leading indicators of performance in an attempt to avoid
reliance solely on lagging indicators. But, all this accomplished was to add a non-financial indicator to
the previous use of solely financial indicators and did not improve overall innovation performance. As
might be anticipated, it drove increased performance in incremental improvements that were quick and
easy and reduced the focus on the radical or breakthrough innovations that the company desired since
they took more time and were more difficult. Our management control and performance measurement
literature would have predicted this behavior, but in most cases, even the more progressive companies
are struggling with understanding the drivers of innovation success and developing the systems and
structures to improve performance. Management control researchers can make a significant
contribution to both the academic and managerial literature by providing specific guidance on the
managerial actions that drive improved performance and the appropriate measures of the inputs,
processes, outputs, and outcomes of innovation activity.
4)
Mergers ---Both academic research and managerial articles generally conclude that the success
of mergers is very small estimating that 70-80% of mergers fail. Why do they fail and what are the
appropriate measures of success? What are the factors that lead some companies to be continuously
successful in mergers while most companies destroy shareholder value when they combine? What are
the specific management control actions that companies can take to increase the likelihood of merger
success and what are the appropriate performance measures to evaluate merger success?
An extensive review of the previous empirical research provides few answers. A recent analysis, the
development of a model, and a comprehensive field study provided some answers, guidance for future
managers, and additional opportunities for researchers. There were two components of the research
6
study: performance measures of merger success and management control actions for success in post
merger integration. The primary field work was conducted at JPMorganChase a combination in 2001
of Chase Manhattan Bank and JP Morgan and Co.
a) Measures of Merger Success-- Current performance measures of merger success are poor.
Primarily, they include only short-term outcome measures and the ones being used do not adequately
evaluate success. But, not only are the lagging indicators insufficient, there are typically no leading
indicators. Thus, there are no input or process measures that would provide guidance on the drivers and
key factors of success.
Better measures are needed that include both short term and long term indicators of merger success and
the inputs and processes necessary to drive that success. Using short-term measures such as stock price
to evaluate success are clearly insufficient to understand or predict long term merger success. Both
financial and non-financial metrics related to the performance on seven factors (strategic vision,
strategic fit, deal structure, due diligence, pre-merger planning, post-merger integration, and external
factors) that drives to success are necessary. Researchers and managers alike need a better
understanding of the management control actions and performance measures that lead to success in
each of these key factors and the causal relationships of superior merger performance. (Epstein 2003a).
b) Key Success Factors in Post Merger Integration—Much of the research on mergers fails to
make a critical distinction between three very different approaches to business combinations: mergers,
acquisitions, and conglomerates. The management control actions for integration and performance
measures are quite different for each. This study concludes that there are five key success factors to the
successful combination of two companies in a merger: 1) integration strategy, 2) structure (integration
team) and systems including 3) communication, 4) speed, and 5) aligned systems. (Epstein 2003b)
There have been numerous articles and cases on Cisco’s and GE’s approaches to integration in
acquisitions and conglomerates but there have been few articles written about integration among
mergers of equals.(See for example Tempest, Kasper et al (2000) and Ashkenas, DeMonaco et al
(1998).
After decades of failures, we still have not carefully delineated the different management control
structures and systems—the actions to drive success—in the merger process and the performance
measures to evaluate merger success. More extensive research is necessary on both the management
control actions and performance measures to both drive and evaluate merger success and improve
organizational performance
5)
Sustainability---In 2001, Epstein and Roy proposed a model to describe the drivers and
measures of corporate social, environmental, and economic performance (sustainability). The model
articulates the actions that companies can take to attain superior performance in sustainability and the
relevant performance measures. By providing more specificity to the inputs, processes, outputs, and
outcomes, managers can direct their activities to those that are more likely to produce greater results.
Researchers can also test this and similar models to determine which management control actions lead
to superior organizational performance. (See Epstein and Roy 2001, 2003b)
EXHIBIT 4 HERE
7
Epstein and Wisner have examined empirical data in the United States and in Mexico to explain the
antecedents and consequences of various corporate actions to improve corporate environmental
performance and to begin to answer the questions as to the drivers of success in corporate
sustainability. One study in Mexico (Wisner and Epstein 2003) develops a management control model
and examines how strategy and various management control mechanisms impact corporate
environmental performance.
In a related study and using a U.S. data base, they were able to examine not only the drivers of superior
corporate environmental performance but also the impacts of that performance on corporate financial
performance. (Wisner, Epstein et al 2003a) In a related paper, they have identified the specific
management control actions and mechanisms that lead to superior performance. (Wisner, Epstein et al
2003b) See Exhibit 5 for the model.
EXHIBIT 5 HERE
In two papers, Epstein and Schnietz examined the impacts of sustainability performance on financial
performance. Whereas Wisner, Epstein, and Bagozzi used earnings growth and return on investment as
their output measures of financial performance, Epstein and Schnietz use an event study to examine
stock market reaction to changes in corporate sustainability performance. (Epstein and Schnietz 2002
and Schnietz and Epstein 2003). They find that companies with better reputations for sustainability
were better insulated from the stock market declines related to the WTO trade talk failures in 1999 and
they incurred a decline on average of $378 million less in market capitalization due to their reputation
for sustainability. Some of this work attempts to model the drivers and measures of success in
corporate sustainability. Some examines improvements in sustainability performance and builds on
earlier field research by Epstein (1996). Other uses survey data to test the specific management control
mechanisms to determine which ones have a greater impact on performance. But, much more needs to
be done to provide better guidance to both managers and researchers as to the specific actions that can
be taken to improve organizational performance.
Summary
For decades, management control researchers have developed new models for the implementation of
strategy with the goal of improving organizational performance. Unfortunately, progress has been
slow. Most of the models have not been adequately tested. Even reasonably intuitive propositions that
increased alignment of strategy, structure, and systems will lead to improved performance have not
been proven. So, we have few clear results as to what drives organizational success. And, though we
have explored numerous approaches to performance measurement, we have not been able to identify
when particular performance measures are more appropriate and whether they lead to improved
performance. Researchers need to determine when specific structures and systems will lead to
improved performance and what characteristics of superior organizations are critical and can be
replicated by other companies and managers.
Much of the work cited above in the five areas of inquiry is focused on the drivers of superior
organizational performance and the appropriate performance measures of the inputs, processes,
outputs, and outcomes. We need to be able to better answer the questions of how do we design
organizations to become superior performers, what are the specific actions that managers can take and
8
systems they can implement to drive success, and what are the appropriate measures of success. In
some of the areas, new models were developed. In some areas, field studies, company cases, and
surveys were conducted and empirical analysis completed. Various management control mechanisms
were investigated and a variety of performance measures used.
These are complex problems that will not be answered easily. But, management control researchers
should not accept the models that have been developed without further testing. They should not accept
the models of performance measurement without validation. And, most of the propositions have not
been adequately tested.
Researchers need to provide more specificity for managers as to what actions will lead to superior
organizational performance. Extensive empirical and field research is necessary. Some may test
whether the balanced scorecard model, shareholder value model, levers of control model, or other
current models do lead to superior performance.
What can we say regarding how to become a high performance organization? We usually think about
high performance organizations having strong financial results, satisfied customers and employees,
high levels of individual initiative, productivity, and innovation. And, we talk about how high
performance is achieved—including mission, vision, aligned performance measurement and reward
systems, and strong leadership. But, we have validated very little of these propositions.
We need to do far more research to advance knowledge of organizations and the drivers and measures
of success. We need to contribute to the building of a research base and developing a deeper
understanding of the causal relationships. Only in this way can we provide guidance to managers as to
what actions they should take to lead to superior organizational performance.
Collins and Porras (1994) and Collins (2001) are beginnings but far more needs to be done. There is
much that management control research can provide to better understand the actions that are needed to
drive organizational success. Careful research in the role of strategy, structure, systems, people, and
culture as determinants of organizational success can provide significant contributions to the academic
literature and to guidance for management practice. This is a challenge for all researchers in
management control and performance measurement.
9
References
Ashkenas, R., DeMonaco, L. and Francis S. (1998). Making the Real Deal: How GE Capital
Integrates Acquisitions. Harvard Business Review, January-February. 5-15.
Carr, N. G. (2003). Does IT Matter?. Harvard Business Review, April.
Chesbrough, H. W. (2003). Open Innovation: The New Imperative for Creating and Profiting from
Technology. Boston: Harvard Business School Press, March.
Collins, J. (2001). Good to Great: Why Some Companies Make the Leap and Others Don’t. New
York: HarperBusiness.
Collins, J. and Porras, J. (1994). Built to Last: Successful Habits of Visionary Companies. New York:
HarperBusiness.
Currall, S. and Epstein, M. J. (2003). The Fragility of Organizational Trust: Lessons From the Rise
and Fall of Enron. Organizational Dynamics, Spring.
Davila, T., Epstein, M. J. and Matusik S. (2003). Innovation Strategy and the Use of Performance
Measures. Working Paper, Rice University.
Davila, T., Epstein, M. J. and Shelton, R. (2004). Innovation Rules: Management Disciplines and
Metrics for Growth. Manuscript draft Rice University.
Epstein, M. J. (1996). Measuring Corporate Environmental Performance: Best Practices for Costing
and Managing an Effective Environmental Strategy Burr Ridge, Illinois: Institute of Management
Accountants and Irwin Professional Publishing.
Epstein, M. J. (2002). Measuring the Payoffs of Corporate Actions: The Use of Financial and NonFinancial Indicators. In M. Epstein and J. F. Manzoni (Ed.), Performance Measurement and
Management Control: A Compendium of Research, London: Elsevier Science.
Epstein, M. J. (2003a). The Drivers of Success in Post Merger Integration. Working Paper, Rice
University.
Epstein, M. J. (2003b). The Determinants and Evaluation of Merger Success. Working Paper, Rice
University.
Epstein, M. J. (2004a). Implementing E-Commerce Strategies: A Guide to Corporate Success After
the Dot Com Bust, Praeger Publishers. Forthcoming.
Epstein, M. J. (2004b). Measuring E-Commerce Success. Working Paper, Rice University.
Epstein, M. J. and Birchard B. (1999). Counting What Counts: Turning Corporate Accountability into
Competitive Advantage, Perseus Books, Reading, MA.
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Epstein, M. and Manzoni J. F. (2002). Performance Measurement and Management Control: A
Compendium of Research, Elsevier Science, London.
Epstein, M. J. and Roy, M. J. (2001). Sustainability in Action: Identifying and Measuring the Key
Performance Drivers. LRP: Long Range Planning.
Epstein, M. J. and Roy, M. J. (2002). Measuring and Improving the Performance of Corporate
Boards. Society of Management Accountants of Canada.
Epstein, M. J. and Roy, M. J. (2003a). Measuring and Improving the Performance of Corporate
Boards Using the Balanced Scorecard. Balanced Scorecard Report HBS Publishing, March-April.
Epstein, M. J. and Roy, M. J. (2003b). Making the Business Case for Sustainability: Linking Social
and Environmental Actions to Financial Performance. Journal of Corporate Citizenship, Spring.
Epstein, M. J. and Schneitz, K. (2002). Measuring the Cost of Environmental and Labor Protest to
Globalization: An Event Study of the Failed 1999 Seattle WTO Talks. International Trade Journal,
Summer XV1 (2).
Epstein, M. J. and Westbrook, R. (2001). Linking Actions to Profits in Strategic Decision Making.
MIT Sloan Management Review, Spring.
Gompers, P. A., Ishii, J. L. and Metrick, A. (2003). Corporate Governance and Equity Prices.
Quarterly Journal of Economics, February 118 (1).
Hall, B. J. and Lieberman, J. B. (1998). Are CEOs Really Paid like Bureaucrats? Quarterly Journal of
Economics, 113 (3). pp. 653-691.
Kaplan, R.S. and Nagel, M. (2003). First Commonwealth Financial Corporation. Harvard Business
School, Case No. N9-104-042.
Korac-Kakabadse, N., Kakabadse, A. K. and Kouzmin, A. (2001). Board Governance and Company
Performance: Any Correlations? Corporate Governance,1 (1), pp 24-30.
MacAvoy, P. W. and Millstein, I. (1999). The Active Board of Directors and its Effect on the
Performance of the Large Publicly Traded Corporation. Journal of Applied Corporate Finance, Fall
11 (4), pp 8-20.
McKinsey & Company, (2002). Global Investor Opinion Survey: Key Findings, July.
Murphy, K. J. (2000). Performance Standards in Incentive Contracts. Journal of Accounting &
Economic, 30 (3), pp 245-278.
Quinn, J. B. (2000). Outsourcing Innovation: The New Engine of Growth. MIT Sloan Management
Review, Summer.
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Rhoades, D. L., Rechner P. L. and Sundaramurthy C. (2000). Board Composition and Financial
Performance: A Meta-Analysis of the Influence of Outside Directors. Journal of Managerial Issues,
Spring XII (1), pp 76-91.
Schneitz, K. and Epstein, M. J. (2003). The Crisis Value Of A Reputation for Corporate Social
Responsibility: Evidence From The 1999 Seattle WTO Meeting. Working Paper, Rice University.
Simons, R. (1995a). Control in an Age of Empowerment. Harvard Business Review, March-April, pp.
80-88.
Simons, R. (1995b). Levers of Control: How Managers Use Innovative Control Systems to Drive
Strategic Renewal. Boston, Harvard Business School Press, January.
Tempest, N., Kasper, C., Wheelwright, S. and Holloway, C. (2000). Cisco Systems, Inc.: Acquisition
Integration for Manufacturing. Harvard Business School, Case No. 9-600-015, February 15.
Wisner, P. S. and Epstein, M. J. (2003). Linking Management Control System Choices to
Environmental Performance: Evidence From Mexico. Working Paper, Rice University.
Wisner, P. S., Epstein, M. J., and Bagozzi, R.. (2003a). Organizational Antecedents and Consequences
of Environmental Performance. Working Paper, Rice University.
Wisner, P. S., Epstein, M. J., and Bagozzi, R. (2003b). Managing what matters: Managerial control
processes and actions that influence firm performance. Working Paper, Rice University.
12
Exhibit 1
The Accountability Cycle
Strategy
(with Board of Directors)
Feedback
Feedback
External Reporting
& Review
Objectives & Critical
Success Factors
Governance
Reporting
Accountability
Communities
Internal Reporting
& Review
Employees
Shareholders
Measurement
Financial Operational
& Social Measures
Customers
Feedback
Feedback
Management
Systems
Initiatives
Pay & Incentive
Targets & Budgets
Source: Epstein and Birchard (1999)
13
Exhibit 2
Board
Performance
Corporate
Performance
Board and committee structure
Productive meetings
Succession planning system
Financial reporting and communication/risk management
Strategic information system/information availability
Performance evaluation / compensation systems
• Superior strategic guidance and oversight
• Accountable organization
• High quality senior executives
▪ Long term financial success
Source: Epstein and Roy 2002
14
PROCESSES
•
•
•
•
•
•
OUTPUTS
Feedback
Board Systems
and Structure
Independence
Diligence
Competence
Ethics
OUTCOMES
Board
Composition
•
•
•
•
INPUTS
Determinants of Board Performance
Exhibit 3
Antecedents and Consequences of E-Commerce Success
INPUTS
PROCESS
OUTPUTS
External
Environment
Corporate
Strategy,
Structure,
and
Systems
OUTCOME
Customer
Acquisition
E-Commerce
Structure
Leadership
Customer
Loyalty
E-Commerce
Strategy
Cost Savings
E-Commerce
Systems
Channel
Optimization
Value Capture
Resources
Feedback Loop
Source: Epstein 2004a
15
Profitability
Exhibit 4
Drivers of Sustainability
Sustainability actions
(Strategy, plans & programs, structure & systems)
Sustainability
performance
Corporate
and
business
unit
strategy
Stakeholders
reactions
• Work force diversity
• Environmental impacts
• Bribery/corruption
• Community involvement
• Ethical sourcing
• Human rights
• Product safety
• Product usefulness
• Employees
• Community
• Customer
• Government
• Investors
• Financial analysts
Corporate Cost - Benefit of actions
Feedback
Source: Epstein and Roy (2001)
16
Long
term
corporate
financial
performance
Exhibit 5
Antecedents and Consequences of Superior Environmental
Performance
Management
Management
Commitment
Commitment
Strategic
Planning
Strategic
Proactivity
Proactivity
Planning
Environmental
Returnonon
Return
Investment
Investment
Environmental
Performance
Performance
Earnings
Earnings
Growth
Growth
Disclosure
Disclosure
LifeCycle
Cycle
Life
Analysis
Analysis
Employee
Mainstreaming
Involvement
Resource
Resource
Commitment
Commitment
Performance
Performance
Measurement
Measurement
Capital Equipment
Decision Making
Supplier
Supplier
Focus
Focus
Source: Adapted from Wisner, Epstein, and Bagozzi (2003 a, b)
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